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The painter stands with her back to us, looking out to one side. In front of her, slightly raised, stand two identical female nudes – one a model, the other a painting – captured from the back, their arms clasped behind their heads. A century after it was made, Laura Knight’s “Self-Portrait” (1913) is still breathtaking. Then critics decried it as a vulgar “artistic exercise” that should have remained in her studio. Today, it’s impossible not to marvel at the warp and weft of light and tone through impeccably drafted forms. The angry black-flecked garnet of Knight’s jacket softens into the pink blush on the model’s thighs and buttocks before sharpening into the stringent tangerine screen behind her; the arabesque contortion of the naked waist intensifies the shadow of the spinal column. In its sensuous, heightened realism, “Self-Portrait” foreshadows Lucian Freud.

If a man painted such a portrait, it would smack of ego. But men’s right to represent the female body had never been questioned. Knight, however, had been banned from life classes while at Nottingham School of Art, an injustice she felt bitterly. “Self-Portrait” declares herself simultaneously as woman and subject. Yet it goes further still: for it’s impossible to regard those two naked figures – their spines mutely announcing a refusal to flirt or reveal – without seeing them as disrobed reflections of Knight herself. Even naked, she seems to be declaring, a woman is nobody’s object but her own.

“Self-Portrait” is a masterpiece and the National Portrait Gallery is right to open its new Laura Knight show with it, although the painting would make more impact if it were placed on the wall opposite the entrance rather than immediately to one side.

By the time Knight painted it she was 36 and, by her own admission, “able to sell everything I touched”. Yet nothing in her early life promised success. She was born into a lace-making family in Derbyshire in 1877, and her mother left her father – who died when Knight was five years old – when she was still a baby. At first, her mother supported the family by giving art lessons. When she was 12, Knight was sent to her aunt in St Quentin, France, where she received lessons from a local artist.

But her mother’s financial situation deteriorated. Abandoning plans to study in Paris, Knight returned to Britain and enrolled in the Nottingham School of Art as a non-fee-paying student. On her mother’s death shortly afterwards, she found herself teaching art as well as studying. An article about Knight from a 1929 edition of The Times, reproduced in the exhibition’s concise yet excellent catalogue, describes the poverty that forced Knight and her sickly sister to exist on tea and porridge until “our throats refused to function”.

‘Ruby Loftus Screwing a Breech Ring’ (1943)

At art school, the star pupil was Harold Knight. “I used to place my easel directly behind his, to see exactly how it should be done,” wrote Knight later. In 1903, the pair married and settled in Newlyn, Cornwall.

Newlyn’s “carefree life of sunlit pleasure” delighted Knight. “All the gaiety I had missed in youth came suddenly; work had never been attacked with greater zest,” she wrote. Part of a circle of painters known as the Newlyn School, which included Alfred Munnings, Dod Shaw and Lamorna Birch, their en plein air approach to painting the Cornish landscape arrived at a moment when she was ripe for experimentation. Forays into an impressionistic style include “Lamorna Birch and His Daughters” (1916 and 1933). With the artist and his two little girls posed by a tree on a riverbank, Knight’s Degas-like sense of form allows her to balance an intricate puzzle of branches and limbs with viscous dabs of yellow – bunches of flowers in the girls’ hands and splashes of light falling on the tree – while the wilderness that is the water and the far riverbank is summoned in an abstract mosaic of unmixed colours.

‘Corporal Elspeth Henderson and Sergeant Helen Turner’ (1941)

At the end of the first world war, Knight and her husband moved to London, where the city’s cultural scene was being rocked by Diaghilev’s Ballets Russes. Yet while British modernist painters such as David Bomberg were enthralled by the revolutionary sets and costumes by Picasso and Matisse, Knight was seduced by the exotic charade of ballet itself. She begged a backstage pass for herself and set to “studying and taking notes on all that happened”.

The paintings that resulted, for all their technical prowess, have a snapshot quality. The finest is of Barbara Bonner in 1930. Commissioned by the Chicago industrialist Earl Hoover, it shows the dancer, her body a slumped wonder of off-duty muscles, staring off to one side while a dressmaker trims her tutu. In a tour-de-force of realist candour, Knight employs sculptural draftsmanship and a sheeny, mobile light to immortalise two women in a moment of fleeting intimacy as if she were an Old Master capturing two classical heroes.

Such paradoxes were part of Knight’s nature. While the modernists saw the world around them as no more than a starting point for their own interior visions, Knight always found that reality sufficed. So while she sometimes borrowed the “decisive moment” proffered by photography, she never embraced the experiments such contemporary ideas prompted in many painters. Instead, she cleaved to a traditional, figurative style that, after the second world war, would see her belittled for, in the words of Kenneth Clark, “commonplaceness”. She died in 1970, not forgotten but critically eclipsed by the avant-garde wave she chose never to ride.

‘Pearl Johnson’ (1927)

This exhibition suggests she deserved better. Always drawn to lives on the margins or at extremes, she painted the gypsies on Ascot racecourse and travelled with Billy Smart’s circus. In the mid-1920s, Harold was invited to Baltimore, Maryland, to paint surgeons at the Johns Hopkins Hospital. Knight, who accompanied him, made a series of paintings of staff and patients from the black community. Her comments are troubling – she referred to patients as “darkies” – but the pictures themselves, particularly that of the nurse Pearl Johnson, enjoy a lucid honesty, free of romance or condescension.

Her gift for observation made her an obvious choice when Kenneth Clark, chairing the War Artists Advisory Committee, was seeking war artists. At her best, she captures the hidden apparatus of the human spirit. There can be few more moving military testaments than “Take Off” (1943), which shows four airmen in the cockpit preparing for a test flight. Flooding and withdrawing light to ramp up the drama of faces rapt with concentration and anxiety, and hands engaged in life-or-death manoeuvres, Knight zooms the viewer into the claustrophobic space until we can smell the suppressed fear.

In 1946, she was sent to Nuremberg to paint the war trials. In “The Nuremberg Trial” (1946), a key work on loan from the Imperial War Museum, she makes a rare break with realism to dissolve the courtroom into a derelict cityscape that represents postwar Nuremberg. Chiefly, however, this is a masterly chronicle of what philosopher Hannah Arendt dubbed the banality of evil. Sandwiched between barristers and soldiers, the Nazis – including Goering, Hess and Speer – are respectable, white-haired gents whose relaxed demeanour, as they whisper and take notes, suggests they have registered neither the enormity of their crimes nor the depth of their fall.

A page from Knight’s diaries here reads: “Today Hess’s eyes and mine interlocked. I wanted to smile but his was such a mad, sick stare, I could not either smile or look away from those sick, incredible, coal-black pupils too big to show any white in them.”

Her painting shows him with his head down scribbling furiously, and his bald patch like a round, pink flag of defeat. Knight’s eye for detail nailed him in the end.